Second Quarter Fiscal 2024 Prepared Remarks

Kelsey Turcotte, Senior Vice President of Investor Relations:

Good afternoon and thank you for joining us today to review UiPath's second quarter fiscal 2024 financial results, which we announced in our earnings press release issued after the close of the market today. On the call with me are Daniel Dines, UiPath's Co- Founder and Co-Chief Executive Officer; Rob Enslin, Co-Chief Executive Officer; and Ashim Gupta, Chief Financial Officer. Rob will start the discussion and then turn the call over to Daniel. After that Ashim will review our results and provide guidance. Then we will open the call for questions.

Our earnings press release and financial supplemental materials are posted on the UiPath Investor Relations website: ir.uipath.com. These materials include GAAP to non- GAAP reconciliations. We will be discussing non-GAAP metrics on today's call.

This afternoon's call includes forward-looking statements about our ability to drive growth and operational efficiency, and our financial guidance for the third quarter and full year fiscal 2024. Actual results may differ materially from those expressed in the forward-looking statements due to many factors and therefore, investors should not place undue reliance on these statements. For a discussion of the material risks and uncertainties that could affect our actual results, please refer to our Annual Report on Form 10-K for the year ended January 31, 2023, and our other reports filed with the SEC, including our Quarterly Report on Form 10-Q for the period ended July 31, 2023 to be filed with the SEC. Forward looking statements made on this call reflect our views as of today; we undertake no obligation to update them.

Finally, we invite you to join our user conference, Forward VI, next month in Las Vegas from the evening of Monday, October 9th through Wednesday the 11th. Please reach out to the investor relations team for details.

I would like to highlight that this webcast is being accompanied by slides which includes an embedded AI demonstration video. We will post the slides, and a copy of our prepared comments to our investor relations website immediately following the conclusion of this call.

Now, I would like to hand the call over to Rob.

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Rob Enslin, Co-Chief Executive Officer:

Thank you, Kelsey, and good afternoon, everyone. Thank you for joining us.

Second quarter was incredibly busy. Highlights include the delivery of exciting new AI platform capabilities and several high-energyin-person customer events around the world - all of them to standing room only. Not surprisingly, AI is at the top of everyone's agenda. Digital transformation, where automation plays a strategic role, has never been more important or, with the latest evolutions in AI, more powerful.

Customers are excited about the value we deliver and recognize that our platform, which has been infused with AI since inception, provides an integrated set of capabilities that combines the best of our Specialized AI and governance with the creative power of Gen AI, making the potential of automation almost limitless. And we aren't just talking about AI - we deliver on the promise of AI and automation today across our platform. In particular, communications mining and document understanding are generating a lot of excitement which Graham Sheldon, our Chief Product Officer, will demo in a few minutes.

Turning to the numbers, we ended the quarter with ARR of $1.308 billion, an increase of 25% year-over-year, driven by second quarter net new ARR of $59 million.

We have approximately 10,890 customers, including new logos like Australian Postal Corporation, Lerøy Seafood, Holmes Murphy & Associates, Daewoong Pharmaceutical, and Arrow Food Distribution. Customers with $1 million or more in ARR increased more than 30% year-over-year to 254, while customers with $100,000 or more in ARR increased to 1,930.

Second quarter revenue was $287 million, an increase of 19% year-over-year.

Non-GAAP operating margin increased from negative 5% in the second quarter of last year to positive 10% in the second quarter of this year, as we progress towards our 20% plus long-term operating margin target. And, we delivered $47 million in non-GAAP adjusted free cash flow - a continuing reflection of our growing scale and focus on efficiency.

Given that the macro environment continues to be variable, I am pleased with our execution and results. The cohort of customers of $100 thousand or more in net new ARR is performing well. Value selling is driving platform adoption and these deals are typically expansions where we have a good line of sight into deal progression. The lower end of the market has been harder to call - particularly new customer acquisition. I want

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to be clear - we feel good about the business and the role automation plays in digital transformation. We continue to execute against our strategic initiatives and there is a nice pipeline building as we move into the second half of the year.

Two quarters ago we formally launched our new go-to-market strategy to improve productivity, sell the full platform, and intensify focus on customers that present the largest long-term opportunities for us. The team transitioned well to our new segmentation model and is embracing the broader platform opportunity.

In go-to-market, we continue to invest in industry verticalization, both in people and enablement tools, which is yielding nice results. We saw particular strength in banking and financial services, manufacturing, and technology in the second quarter including great new logos like Performant Healthcare Solutions, First City Monument Bank, and Saint Peter's Healthcare System. Expansion deals in the quarter included Mitsubishi Materials Corporation, a customer since 2017, who expanded to the full platform as they look to grow their automation program across the company.

In addition, our industry expertise gives us unique insights that we can leverage across our customer base, including tools like our solution accelerators. We now have more than 60 available to customers. A Texas based digital health system who recently automated their claims form intake process. Using our accelerators, they expedited their design-to-deploy time from more than eight weeks down to just two.

The foundation of every sales engagement is defining the value of our end-to-end platform which helps customers accelerate their automation programs, drive operational efficiencies, and consolidate spend. During the quarter, Saudi National Bank expanded to the full platform as they plan to take their already mature automation program to the next level. Driving rapid digital transformation and using the full range of capabilities in our platform is a board level priority that is actively sponsored by their CTO and COO.

Platform adoption is also driving competitive displacements. A great example is a fortune 500 oil producer and a UiPath customer since 2018 with over $10 million in cost savings to date. In a competitive take out they expanded to incorporate document understanding and process mining into their automation program as they look to consolidate into one AI enabled platform. Looking forward, they plan to leverage our NorthStar value model to identify expansion opportunities across additional lines of business.

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Not only is NorthStar helping to build pipeline, it also drove several strategic deals in the quarter. Using NorthStar the team delivered a comprehensive view of the operational excellence and tangible value automation could deliver to a large financial services company. As a result, the customer expanded to the full platform including process mining, document understanding, communications mining, and test suite.

As part of our new segmentation we have tasked our Emerging Enterprise team with driving both customer acquisition and early-stage expansion. For example, Apprio, a provider of specialized IT solutions, started their automation journey several years ago and recently engaged with UiPath to clearly define how automation can accelerate their growth trajectory. This resulted in a multi-year,seven-figure full platform deal to help them achieve rapid market expansion in healthcare operations.

Industry analysts are also recognizing our platform capabilities. UiPath was recently designated as a Leader in the Everest Group Intelligent Document Processing Products PEAK Matrix® Assessment 2023. This is the first time UiPath has been named as a Leader in IDP, and the only Leader recognized as a Star Performer for the biggest year-over-year advances. We were also named a Leader in the Everest Group Process Mining Products PEAK Matrix® Assessment 2023 and Everest Group Task Mining Products PEAK Matrix® Assessment 2023.

Our partner ecosystem is key to elevating our market leadership position, growing our share of wallet across key accounts, and delivering the best outcomes for our customers. One of many partner-led customer success stories is with Ashling Partners, who has helped ADT build a transformational automation program across its operations and customer service. This quarter that program expanded to ADT's call center to provide customer service agents with a single pane of glass to reduce data entry, troubleshooting, and other time-intensive tasks.

We are also making great progress with SAP engaging with customers and building a joint pipeline. During the quarter, a German agricultural company challenged by their S/4 HANA migration, selected UiPath in a competitive win based on our holistic integrated platform. They are in the process of implementing test suite for regression testing on their S/4 migration and testing of all SAP modules. They also plan to automate processes in their finance department and incorporate process mining and AI into their automation program.

Before I move on, I want to highlight that our board of directors has authorized a $500 million stock repurchase program which underscores the confidence we have in our business, our ongoing cash flow generation, and the strength of our balance sheet.

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In summary, we delivered another solid quarter of execution against a variable economic backdrop. We're starting to see the benefits from the go-to-market changes we implemented two quarters ago, and we'll continue to exercise expense discipline, while investing to extend our market leadership.

With that, I'll turn the call over to Daniel.

Daniel Dines, Co-Founder and Co-Chief Executive Officer:

Thanks, Rob. Good afternoon everyone, before I begin I want to thank our team members for their relentless commitment to building UiPath, serving our customers, and delivering our market leading AI-powered Automation Platform. I believe we are now at an inflection point with AI and I'm excited to have more time to focus on this next important evolution for the company. This is a time of unprecedented technology advances.

Having said that, AI has been an integral part of our platform since inception - starting with our original core capability, Computer Vision, which allows software robots to "see" and "understand" screens. Today our entire platform is infused with AI and we are at the cutting edge of the quickly evolving intersection of AI and automation.

To be effective, Generative AI needs context, which our software robots can deliver by gathering information from across the enterprise - in data, documents, CRM, ERP, and beyond. It also needs our platform to take action and operationalize the promise of AI today with an integrated set of capabilities that combines our Specialized AI with Generative AI. And, finally, it needs the governance our platform provides to help customers overcome a significant barrier to adoption.

Looking ahead, we expect this next evolution of Gen AI to be a tailwind to the business, helping customers create better, more resilient automations more quickly and opening up novel use cases that facilitate the automation of even more processes.

First, we are enhancing developer productivity by reducing barriers to development with co-pilot-like experiences and project "Wingman" which we showed you during last quarter's earnings call. At the Ai4 Conference in mid-August, we officially launched Wingman into private preview and we are already seeing strong demand from customers. Wingman brings together our AI Computer Vision's deep understanding of computer screens with Gen AI and is designed to enhance automation creation for both business users and developers through a user-friendly experience.

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UiPath Inc. published this content on 06 September 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 September 2023 22:14:03 UTC.